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Your guide to choosing a bank account

Are you still paying unnecessary bank fees?

There once was a time when most banks charged an account keeping fee – meaning you had to pay the bank for holding on to your money! Meanwhile, the banks were using your hard-earned cash to make some very tidy profits through loans, investing and other complicated banking stuff.

CHOICE fights unfair fees

Last time we checked, consumers were unknowingly giving the major banks a free kick of at least $7.3 billion by keeping $153 billion of their cash in low- or no-interest transaction accounts that also charge hundreds of millions of dollars in fees.

This never sat well with the money gurus at CHOICE, and fortunately the era of high banking fees has been winding down. We like to believe we had something do with that, since CHOICE has been campaigning against unfair bank fees for a long time. When NAB became the first bank to drop its account keeping fee in 2009, its customers started saving about $110 million annually.

These days, it's not hard to find a bank that doesn't charge a monthly fee – and it's not hard to find out which ones do and which ones don't.

How do I check on account keeping fees?

Simply go to the bank's website and access its fee schedule. Since you're likely to get hit with some form of a Product Disclosure Statement (PDS), be prepared to be confused. You will likely have to scroll around a bit, but the bank is obliged to disclose all the details. If you're still not sure after checking the PDS, give the bank a call and ask how well its policies line up with our CHOICE Banking Checklist.

How do I check on penalty fees?

Bank penalty fees, also known as exception fees, aren't as easy to avoid as account keeping fees, but they too have come down in recent years. Financial institutions raked in $503 million in penalty fees from household transaction accounts in 2008-09. By 2009-10 that figure had dropped to $465 million.

We've always argued that banks should not be allowed to charge customers more than it costs to fix the problem, and in February 2014 the Federal Court agreed, ordering ANZ to reimburse about 43,000 customers for penalty bank fees as high as $45. Customers have also sought to recoup unfair fees from BankSA, Bankwest, Citibank, Commonwealth, NAB, St George and Westpac.

We think an overdrawn account charge should be no more than $5, and banks should make a few tries to complete the transaction before applying a penalty.

To find out what penalty charges you could face, check the fee schedule for your account type by searching on your bank's website or asking them in person.

The CHOICE Banking Checklist

The best bank accounts should stand up to the CHOICE Banking Checklist:

No-monthly-fees with no conditions attached, such as a minimum monthly deposit or balance.

Unlimited, unconditional free own-bank ATM and EFTPOS transactions.

A range of other unlimited transactions at no cost, including direct debit or credit, phone and internet banking, BPAY service and over-the-counter service if available.

Transaction accounts should be linkable to a savings account with a reasonable interest rate (the arrangement is sometimes called a cash management account), and you should be able to transfer money back and forth between the accounts via the internet as often as you like at no charge.

Am I earning enough interest on my savings account?

Many savings accounts offer a high introductory rate (or teaser rate) and then drop to a standard rate well below the market leaders. In the long term, a high standard rate will outperform any introductory offer, and the hassle of moving money around often puts people off switching once they have settled on a product. Therefore, in most cases, you should choose an account with the highest standard rate.

However, there's nothing stopping investors from moving their money to take advantage of the leading rates and then switching again when a better deal comes along. CHOICE tested this approach and found that taking short-term advantage of teaser rates can lead to significant gains over time.